Why the Recent Lift in Junior Miners Will Likely Continue

In early January, the S&P/TSX Venture Composite Index rose above the 200-day
moving average for the first time in three years. The index is also very close
to experiencing a golden cross, which is when the shorter-term 50-day moving
average crosses above the 200-day moving average. Historically, traders see
this cross as extremely bullish.

You can see on the chart that there have been few occurrences of golden crosses
over the past five years, with one in 2009 and another in 2011. Following these
crosses, the index saw a spectacular increase.

The Canadian venture index holds 372 micro-capitalization securities that
trade on the S&P/TSX exchange. It's a resources-heavy index, with more
than 80 percent of the holdings in the energy and materials sector. Making
up the top 10 by weight are energy companies including Africa Oil, Mart Resources,
Americas PetroGas and Madalena Energy.

These stocks will be familiar to the shareholders of the World
Precious Minerals Fund (UNWPX), as they are representative of the fund's
holdings. Historically, we've found that these junior mining companies outperformed
their larger counterparts.

As resource investors, we're particularly encouraged by this "golden cross," but
what makes us even more optimistic is further data supporting the cyclical
areas of the market.

Cyclical companies in sectors such as information technology, industrial,
materials, and consumer discretionary tend to sell goods and services beyond
the basic needs. These are the goods and services businesses and consumers
buy when times are good.

So consider the potentially major impact that increased investment spending
might have on these companies. After curtailing capital expenditures following
the Great Recession, businesses may be in the process of reversing that trend
after a prolonged period of under-investing.

According to Bank of America Merrill Lynch's newest fund manager survey, which
involved 234 participants that manage nearly $700 billion in assets, participants
are frustrated with companies that have been hoarding their cash. Comparing
the latest results to survey data going back a full decade, a record 58 percent
of participants said they wanted corporate cash to be spent on capital investment.

Another record 67 percent say that "companies are 'under-investing,'" says
BofA-ML survey data.

This is the "most conviction since 2001," which likely means that the boards
of public companies will find it tough to "ignore the massive shift" in sentiment,
says Brian Belski of BMO Capital Markets.

We're pleased with this change of opinion, as capital investment helps propel
the economy and boosts productivity and profits. Investors also see a potential
boost: As companies begin spending their cash on things such as productivity-boosting
software and capital equipment, businesses in technology and industrials sectors
likely benefit.

Take a look at BMO's chart below, which shows the average annual performance
during these cyclical uptrends in capital expenditures. The data goes back
to 1970, so it provides tremendous historical support. As you can see, information
technology and industrials are among the sectors that benefited the most from
capital expenditure growth. During these periods, these stocks climbed an average
of about 16 percent.

In contrast, telecommunications and utilities have the weakest performance
during the uptrends.

What's so appealing about this chart is that these cyclical areas of the market
have also been tagged in our Holmes
Macro Trends Fund (ACBGX) model as relatively strong sectors. And while
information technology, industrials and consumer discretionary have already
performed well, we've identified fundamentals that suggest these areas of the
market will continue rising in value.

Belski lists individual stocks that he believes can benefit from the rising
capital expenditures. Some of his picks that overlap with our fund's holdings
include Danaher, Flowserve, Wabash National and QUALCOMM.

If this increase in capital expenditures materializes, it could stress factories
even further, as capacity utilization climbs toward its long-term average.
Capacity utilization measures the extent that factories are in use, and currently,
manufacturing companies are operating at 79.2 percent of full capacity. The
average since 1980 has been 79.4 percent.

This rate is significantly different compared to June 2009, when the rate
dropped to a record low 66.8 percent. It's no surprise that manufacturing has
been staging a huge comeback following the recession but the chart below illustrates
the continuing rising trend since it hit bottom.

With the potential uptrend in investment spending coupled with factories cranking
out goods at a faster, busier pace, chances are good we'll see continued growth
from cyclical areas of the market, especially in tech and industrials.

And if the utilization rate keeps climbing higher, companies won't be able
to increase their output without incurring additional fixed costs to purchase
new machinery or build new facilities. That's bullish for metals and mining
companies, such as many of the businesses held in the S&P/TSX Venture Composite
Index. Make sure your portfolio is poised to participate.

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Please consider carefully a fund's investment objectives, risks,
charges and expenses. For this and other important information, obtain a fund
prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637).
Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.

Gold, precious metals, and precious minerals funds may be susceptible
to adverse economic, political or regulatory developments due to concentrating
in a single theme. The prices of gold, precious metals, and precious minerals
are subject to substantial price fluctuations over short periods of time and
may be affected by unpredicted international monetary and political policies.
We suggest investing no more than 5 percent to 10 percent of your portfolio
in these sectors.

Past performance does not guarantee future results. All opinions
expressed and data provided are subject to change without notice. Some of these
opinions may not be appropriate to every investor. The S&P/TSX Venture
Composite Index is a broad market indicator for the Canadian venture capital
market. The index is market capitalization weighted and, at its inception,
included 531 companies. A quarterly revision process is used to remove companies
that comprise less than 0.05% of the weight of the index, and add companies
whose weight, when included, will be greater than 0.05% of the index.

Frank Holmes is CEO and chief investment officer of U.S. Global Investors,
Inc., which manages a diversified family of mutual funds and hedge funds specializing
in natural resources, emerging markets and infrastructure.

The company's funds have earned more than two dozen Lipper Fund Awards and
certificates since 2000. The Global Resources Fund (PSPFX) was Lipper's top-performing
global natural resources fund in 2010. In 2009, the World Precious Minerals
Fund (UNWPX) was Lipper's top-performing gold fund, the second time in four
years for that achievement. In addition, both funds received 2007 and 2008
Lipper Fund Awards as the best overall funds in their respective categories.

Mr. Holmes was 2006 mining fund manager of the year for Mining Journal, a
leading publication for the global resources industry, and he is co-author
of "The Goldwatcher: Demystifying Gold Investing."

He is also an advisor to the International Crisis Group, which works to resolve
global conflict, and the William J. Clinton Foundation on sustainable development
in nations with resource-based economies.

Mr. Holmes is a much-sought-after conference speaker and a regular commentator
on financial television. He has been profiled by Fortune, Barron's, The Financial
Times and other publications.

Please consider carefully a fund's investment objectives, risks, charges and
expenses. For this and other important information, obtain a fund prospectus
by visiting www.usfunds.com or by calling
1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed
by U.S. Global Brokerage, Inc.